A decentralized organization structure means local managers have significant decision-making authority within your business. Rather than having human relations, marketing, merchandising and operations decisions largely controlled at a central headquarters, local leadership takes on these duties. Deciding which strategy makes sense for your business demands on your availability of talented leaders and the nature of your operations.

Basics

If a company has a main office and 10 additional business units in a radius around it, managers at each of the separate units make key decisions in a decentralized structure. This means local managers typically hire and fire their own employees, plan training, make marketing and pricing decisions, and lead customer service processes. While local managers have authority, company leadership generally offers some guidance and direction for consistency.

Positives

Decentralized organizations make a lot of sense if you have deep talent in the local management ranks. Your local leaders have an ability to adapt and react more quickly to happenings in the local market. If a major news event happens in the community, a local manager can run a promotion or figure out ways to quickly get involved to gain publicity. Local stores or business units can also gauge the pulse of the local market. They can get to know what customers want and respond. Customers want to feel like a local store is connected to the community in a local way.

Negatives

Detractors of decentralization note that it dilutes your decision-making ability to entrust local managers with specialized decisions. For instance, allowing store managers to control their own HR processes may be riskier than having human resource professionals overseeing all HR activities. Inconsistency is another concern. If different managers make decisions that contradict each other, it may confuse consumers in the broad market as to what your brand is about. If one store has a strong customer service orientation, but others don't, customers may become frustrated.

Technology

Technology has made it much more feasible for businesses to operate a decentralized, or hybrid organization. The Internet, email, mobile phones and discussion forums allow company employees to stay closely connected. This enables company executives to provide input, but rely on local managers for implementation. Local managers can also share ideas and communicate about challenges, which aids consistency.

References

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.